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Putin in Gas for Roubles Ruse

04/04/22 – Weekly Market Briefing

Putin in Gas for Roubles Ruse

04/04/22 – Weekly Market Briefing

Good morning,

Will Smith scooped the Oscar for best actor on Sunday. Amazingly however this wasn’t the most newsworthy piece of news relating to the Fresh Prince star. Before he scooped the golden gong Smith smacked the comic Chris Rock on stage in front of a stunned Hollywood audience. Rock had made a joke that admittedly went too far about Smith’s wife, but it will be the reaction that will go down in Hollywood history.

Last Week

A tempestuous week in the Russian-Ukraine war saw financial markets trade aggressively. Hopes of a ceasefire characterised market movements in the early part of week. Talks held in Istanbul proved to be constructive with both sides ceding common ground. This initially saw investors flood into the euro with the single currency hitting its highest level since the start of the war. Doubts remain on Russian intentions, despite pledging to drastically scale back military operations around Kyiv. Putin’s Pledge to only take payment for oil and gas in Russian roubles & a Ukrainian counterattack on a miliary based on Russian soil in Belgorod saw the EURs run crack in the later part of the week.

One currency that has had a bumpier ride is the Russian Rouble. The Barney (moniker for the rouble after Barney Rubble) has wiped out nearly all its losses since the invasion 6 weeks ago.  This as the Kremlin and the Central Bank of Russia has tightened the flow of capital out of the country and enforced strict credit limits. This shows that Moscow has successfully fended off a collapse of the financial system at the cost of great isolation. This will give the Kremlin propagandist’s a great victory and allow them to sell a narrative at home. Since the outbreak of the war Putin’s approval rating has soared from 60% to 86%. The Western narrative of the Russian people against the war is clearly false and this is a highly complex issue which is going to change the face of global politics.

Whilst the market is rightfully engrossed with the conflict on Europe’s doorstep economics are still of concern. Inflation, interest rate expectations and rampant commodity prices are still driving markets. The US is currently perceived as being head of the pack of western countries in policy terms. Friday’s Jobs Figures for March done nothing to pour cold water on this with another month of robust jobs growth, falling unemployment and higher wages. This all of course further feeding into the aggressive monetary policy stance. The next opportunity for the Fed to raise is on the 4th of May, a 50bp rise is increasingly looking likely.

This Week

The Euro is proving itself to be the G10 currency most sensitive the Russia-Ukraine conflict. The single currency traded aggressively within a 1.5% trading band last week on news and counter news flow on the conflict. The bloc is racked not only by fears of an overspill of the conflict but also on an impending recession. Thus far figures have held up, however Tuesday will bring more PMI figures which will give us an view into sentiment and how things might go over the next few months.

The Fed Minutes from last months policy meeting are released on Wednesday. With a raft of Fed officials having already came out in support of a 50bp rate rise in May nothing ground-breaking is expected, nonetheless we anticipate the contents to keep the dollar well supported.

Key Events

Tue April 5th – 08:15-09:30 European PMIs, 15:00 US Services PMIs

Wed April 6th – 19:00 FOMC Minutes

Have a great week,

The Garton Team.

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